Back to GetFilings.com
Item 8 and portions of Items 6 and 7 are omitted pursuant to Rule 12b-25
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended September 30, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period from __________ to __________
Commission file number 0-6890
MECHANICAL TECHNOLOGY INCORPORATED
(Exact name of registrant as specified in its charter)
New York 14-1462255
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
968 Albany-Shaker Rd, Latham, New York 12110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518)785-2211
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act
$1.00 Par Value Common Stock
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The aggregate market value of the registrant's Common Stock held by
nonaffiliates of the registrant on December 13, 1996 (based on the last
sale price of $2.00 per share for such stock reported by NASDAQ for that
date) was approximately $6,503,372.
As of December 13, 1996, the registrant had 4,899,301 shares of Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Document Where Incorporated into Form 10-K Report
Proxy Statement for Part III
Annual Meeting of Shareholders
to be held on April 16, 1997
PART I
ITEM 1: BUSINESS
Mechanical Technology Incorporated and its subsidiaries produce products
and render services in two business segments:
* Test and Measurement
* Technology
The major markets for these products and services are the electronics,
aerospace, capital goods, and defense industries. 72% of the Company's
revenues from operations were derived from product sales in the Company's
fiscal year ended September 30, 1996; the remaining 28% of revenues were
derived from technology support and research and development contracts.
Mechanical Technology Incorporated was incorporated in New York in 1961.
Unless the context otherwise requires, the "registrant", "Company",
"Mechanical Technology", and "MTI" refers to Mechanical Technology
Incorporated and its subsidiaries. The Company's principal executive
offices are located at 968 Albany-Shaker Road, Latham, New York 12110 and
its telephone number is (518) 785-2211.
Significant Developments in the Business
- ----------------------------------------
During the third quarter of fiscal 1996 the Company announced it had
reached an agreement in principle to sell its wholly owned subsidiary,
Ling Electronics Inc. ("Ling"), of Anaheim, California, for an amount, to
be paid in cash at closing, approximating Ling's net book value. A
definitive agreement was negotiated and executed; however the buyer
failed to obtain funding prior to the expiration date of the agreement.
The Company has now discontinued efforts to sell Ling.
In June 1996, the Company successfully raised $1.9 million (net of $100
thousand in expenses) in new capital through a private placement of 1.3
million shares of Common Stock, which was sold at an offering price of
$1.50 per share. The proceeds of this placement were applied to the
Company's line of credit.
The Company's wholly owned subsidiary, United Telecontrol Electronics,
Inc. ("UTE") of Asbury Park, New Jersey, filed a voluntary bankruptcy
under Chapter 11 of the Federal Bankruptcy Code in April 1994. During
October 1994, UTE commenced an orderly liquidation and final court
approval occurred during the third quarter of fiscal 1996. Accordingly,
the Company no longer includes Defense/Aerospace amongst its reportable
business segments and UTE has been classified as a "discontinued
operation" in the Company's Financial Statements. (See Note ___ to the
accompanying Consolidated Financial Statements).
During November 1994, the Company sold all of the outstanding capital
stock of its subsidiary, ProQuip Inc. ("ProQuip") of Santa Clara, CA for
approximately $13.3 million. The sale resulted in a gain of approximately
$6.8 million in fiscal 1995 and $750 thousand, as a result of the release
of escrow funds, in fiscal 1996. (See Note ___ to the accompanying Consol-
idated Financial Statements). ProQuip's financial results are included as
part of the Company's Test and Measurement segment for prior fiscal year
periods covered by this Form 10-K until November 22, 1994 (the date of
its sale).
Business Segments
- -----------------
The Company currently conducts business in two business segments: Test
and Measurement and Technology. (Certain financial information regarding
the Company's business segments is included in Note ___ to the
accompanying Consolidated Financial Statements and is incorporated herein
by reference.) In the Test and Measurement segment, the Company primarily
produces products for sale, while in the Technology segment the Company
primarily performs technology support and research and development under
contract. The Company believes its technology support and research and
development activities provide a competitive advantage to the product
segments through the performance of related research which, for the most
part, is funded by outside parties.
Test and Measurement
The Company derived 71% of its revenues from the Test and Measurement
segment in 1996. Test and Measurement offers a wide range of technology-
based equipment and systems for improved manufacturing, product testing,
and inspection for industry. Business units in this segment include Ling
Electronics Inc., Advanced Products Division, and L.A.B. Division.
ProQuip Inc. was also included in this segment prior to its sale on
November 22, 1994.
Ling Electronics Inc., of Anaheim, California, designs, manufactures, and
markets electrodynamic shakers, high-intensity-sound transducers, and
power amplifliers used to perform reliability testing and stress
screening during product development and quality control. This mode of
testing is used by industry and the military to reveal design and
manufacturing flaws in a broad range of precision products, from
satellite parts to computer components. Recent Ling products for power
and frequency conversion and "clean power" applications include systems
capable of output up to 432 kVA.
The Advanced Products Division designs, manufactures, and markets high-
performance test and measurement instruments and systems. These products
are categorized in two general product families: noncontact sensing
instrumentation and computer-based balancing systems. The noncontact
sensing instrumentation products utilize fiber optic, laser and
capacitance technology to perform high precision position measurements
for product design and quality control inspection requirements. Computer-
based balancing systems include an on-wing jet engine balancing system
used by both commercial and military aircraft fleet maintenance
personnel.
The L.A.B. Division designs, manufactures, and markets mechanically- and
hydraulically-driven test systems for package and product reliability
testing. Among other uses, this equipment simulates the conditions a
product will encounter during transportation and distribution including
shock, compression, vibration, and impact. This type of testing is
widely conducted by businesses involved in product design, packaging, and
distribution.
The business units in the Test and Measurement segment have numerous
customers and are not dependent upon a single or a few customers.
Technology
The Technology segment includes the Technology Division and Turbonetics
Energy, Inc. The Company derived 29% of its revenues from the
Technology segment in 1996. The Technology segment engages in
technology commercialization/product development, provides technical
support to the Company's other divisions, has initiated several
strategic/teaming relationships with other companies, and performs
contract research, development, engineering, and technical services for
government and commercial customers.
The Technology Division is structured into two business areas:
Measurement & Diagnostics and Power & Energy Systems.
The Measurement & Diagnostics business area provides hardware and
software for machine monitoring; develops sensor technology for
imaging, control, and measurement; and is developing new applications
for biomedical markets. This business area develops hardware and
software that determines physical parameters, the health of machines,
and the quality of products that machines produce. Key markets include
the U.S. Air Force and several major utilities. Measurement &
Diagnostics employs proprietary fiber-optic, capacitance, and laser
sensors and software technology for imaging, control, and measurement.
The Technology Division currently deploys an integrated structured-
light mapping and 3D visualization system to support DOE environmental
remediation. In partnership with a major clinic, Measurement &
Diagnostics is capitalizing on the Company's strengths in sensors,
instrumentation, software, and machinery dynamics to create new
applications for the biomedical market.
The Power & Energy Systems business area is a leader in fuel cell
development, develops electronic controls for hybrid vehicles, markets
high-efficiency turbines, and develops advanced technology for rotating
machinery systems. Power & Energy currently is developing fuel cell
technology for both automotive and utility industry applications. This
business area is developing prototype hybrid electric vehicle controls
which support the introduction of fuel cell technology into the
automotive market. The business area is capable of producing high-
efficiency turbines, ranging in size from one to ten megawatts, in the
event that deregulation of utility markets triggers demand. Power &
Energy Systems also has expertise in magnetic bearings, hybrid
bearings, and high-efficiency compressors.
Finally, Turbonetics Energy Inc. ("Turbonetics") previously manufactured
and sold a commercial line of high efficiency steam turbines for electric
power generation in the 1 to 10 MW range, through waste heat recovery
application. Turbonectics is presently inactive, and activities related
to this product line are being conducted within the Technology Division.
The Technology segment, either directly or as a subcontractor, received
approximately 73% of its 1996 revenues (versus 77% in 1995) from various
agencies of the U.S. Government; approximately 69% of the segment's
revenues were derived from two agencies, the Departments of Defense and
Energy. Contracts with the U.S. Government are subject to termination,
at any time, by the Government either for convenience or for other causes
as determined by the contracts. The Technology segment has had no
government contracts terminated which when terminated resulted in a
material adverse effect on the Company.
Backlog
The backlog of orders believed to be firm as of September 30, 1996 and
1995 is as follows:
1996 1995
------ ------
(In thousands)
Technology $ 1,572 $ 2,809
Test and Measurement 6,970 4,502
------ ------
Total $ 8,542 $ 7,311
====== ======
All amounts shown above have been awarded by government agencies or
released to manufacture by commercial customers; however, approximately
$40 thousand of the orders included in the September 30, 1996 backlog may
not be filled during the Company's current fiscal year (as compared to
approximately $70 thousand not expected to be so filled at the end of the
prior year).
Marketing and Sales
- -------------------
The Company sells its products and services through a combination of a
direct sales force, manufacturer's representatives, distributors and
commission salesmen. Each business unit is responsible for its own sales
organization. Typically, the Company's product businesses employ regional
manufacturer's representatives on an exclusive geographic basis to form a
nationwide or worldwide distribution organization; the business unit is
responsible for marketing and sales management and provides the
representatives with sales and technical expertise on an "as-required"
basis. To a great extent, the marketing and sales of the Company's larger
products and systems consist of a joint effort by the business unit's
senior management, its direct sales force, and manufacturer's representa-
tives to sophisticated customers. The manufacturer's representatives are
compensated on a commission basis.
The Company's technology support and research and development services
are sold on a direct basis. Reputation and personal contacts within the
specialized technical areas are critical to the identification and
receipt of support contracts. The Company believes it has an excellent
reputation within the technical areas in which it operates.
Research and Development
- ------------------------
The Company conducts considerable research and development. The following
table summarizes company- and customer-sponsored expenditures on
technology support, research and development, and product development for
the last three years:
1996 1995 1994
------ ------ ------
(In thousands)
Company-Sponsored $ 1,263 $ 1,425 $ 3,270
Customer-Sponsored 5,946 8,492 7,742
------ ------ ------
Total $ 7,209 $ 9,917 $11,012
====== ====== ======
While the amount estimated above as customer-sponsored research
activities is often not directly related to the development of new
products or the improvement of existing products, it is the belief of the
Company that these expenditures contribute to the growth of the Company's
technological base.
Product Protection
- ------------------
The Company holds numerous patents and rights in various fields of
technology. However, these patents, either individually or collectively,
are not believed to be material to the success of any of the Company's
business segments. The technology of the Company is generally an
advancement of the "state of the art", and the Company expects to
maintain a competitive position by continuing such advances rather than
relying on patents. Licenses to other companies to use Company-developed
technology have been granted. Licenses which have been granted or agreed
to be granted have been and are expected to be of benefit to the Company,
though royalty income received in recent years has not been material in
amount and is not expected to be material in the foreseeable future.
Competition
- -----------
The Company and each of its business segments are subject to intense
competition. In each of its business segments, the Company faces
competition from at least several companies, many of which are larger
than MTI and have greater financial resources. While the business units
in the Company's Test and Measurement segment each have a major share of
their respective markets, the Company does not consider any of them to be
dominant within its industry. The Company's Technology Division has a
negligible share of its respective market and competes with dozens (and
perhaps hundreds) of competing providers of similar products and
services, many of whom have greater financial and technical resources.
The primary competitive considerations in the business segments in which
the Company operates are: product quality and performance, price, and
timely delivery. The Company believes that its research and development
skills and reputation are competitive advantages.
Employees
- ---------
The total number of employees of the Company and its subsidiaries was 233
as of September 30, 1996, compared to 232 as of the beginning of the
fiscal year.
Executive Officers
- ------------------
The executive officers of the registrant (all of whom serve at the
pleasure of the Board of Directors), their ages, and the position or
office held by each, are as follows:
Position or Office Name Age
-------------------- -------------- -----
Chief Executive Officer R. Wayne Diesel 51
and a Director
President and Chief Martin J. Mastroianni 52
Operating Officer
Chief Financial Officer Stephen T. Wilson 44
Vice-President and General Manager Douglas McCauley 48
Technology Division
President and Chief Operating Officer, Stephen S. Sullivan 62
Ling Electronics Inc.
Vice-President and General Manager, Denis P. Chaves 56
LAB Division and Advanced
Product Division
Mr. Diesel was elected Chief Executive Officer of the Company in February
1994, and prior to December 1996, also held the title of President. Prior
to February 1994, he had been Chief Financial Officer since 1991 and
President since March 1993 of Lawrence Management Group, and Treasurer of
the Lawrence Insurance Group, Inc. since March 1993. From 1988 until his
association with Lawrence Group, Inc., Mr. Diesel was Administrative Vice
President responsible for corporate administration, human resources and
strategic planning at KeyCorp. Previously, he held various executive
positions with the State of New York.
Mr. Mastroianni was appointed President and Chief Operating Officer of
the Company in December 1996. Prior to joining the Company, he served
most recently as Director, Transmission Power Delivery for the Electric
Power Research Institute (EPRI) where he was employed since 1992.
Previously, between 1973 to 1992, he held senior management positions in
the technology driven test and measurement industries with Vacuum
Components, Inc., Tenney Engineering, Inland Vacuum Industries,
Halocarbon Products, Inc., and Allied Signal Corporation.
Mr. Wilson joined the Company in March 1995 and was appointed Chief
Financial Officer. Prior to joining the Company, he had been the Manager-
Corporate Accounting/Banking of Lawrence Management Group since January
1991. Prior to 1991, he held various management positions with Fleet
Financial Group.
Mr. McCauley has been Vice-President and General Manager of the
Technology Group since August 1994. He was previously Director of
Business Development from January 1989 to September 1991 and from October
1993 to August 1994. From October 1991 to October 1993 he had been Vice
President of Corporate Development for Chamberlain Manufacturing
Corporation, responsible for business conversion from defense to
commercial products. Prior to 1989, he held various management positions
with the General Electric Company.
Mr. Sullivan has been President and Chief Operating Officer of Ling
Electronics Inc., a wholly owned subsidiary of the Company, since August
1992. Mr. Sullivan was previously Executive Vice President of Ling
Electronics Inc. from January 1990 through August 1992. Prior to 1990,
he held various management positions with Ling Electronics Inc. since his
employment in 1977.
Mr. Chaves has been Vice-President and General Manager of the Company's
Advanced Products Division since 1987 and Vice-President and General
Manager of the Company's LAB Division since January 1994. Previously, he
served as Manager of Corporate Marketing for the Company from 1981 to
1987.
ITEM 2: PROPERTIES
The Company and its subsidiaries presently own or lease real estate
principally in New York and California. In management's opinion, these
facilities are generally well maintained and are adequate to meet the
Company's current and anticipated future needs.
Owned Properties
The Company's corporate headquarters and certain of its research and
development and manufacturing facilities are located in a three-building
complex of approximately 103,000 square feet on 38 acres in Latham, New
York, which is owned by the Company. This complex is divided
approximately equally between office and laboratory-manufacturing areas.
Corporate staff, the Technology segment, and the Advanced Products
Division (part of the Test and Measurement segment) are located at the
Latham facility.
The property referred to in the preceding paragraph is subject to
mortgages to secure the Company's indebtedness described in Note ___ to
the accompanying Consolidated Financial Statements.
Leased Properties
The Company and its subsidiaries lease the following facilities in which
its various business units conduct operations; generally, these are
stand-alone low-rise buildings containing primarily manufacturing space,
with some portion of each used for office space.
Approximate Lease
Location Square feet Segment Used By Expires
---------- ------------- --------------------- -----------
Anaheim, CA 85,000 Test and Measurement June,1998
Malta, NY 18,000 Technology Dec.,1999
Skaneateles, NY 18,000 Test and Measurement June,1998
In addition to the above properties, the Company and its subsidiaries
lease several small offices for field engineering and/or marketing
personnel at various locations in the United States and United Kingdom.
ITEM 3: LEGAL PROCEEDINGS
At any point in time, the Company and its subsidiaries may be involved in
various lawsuits or other legal proceedings; these could arise from the
sale of products or services or from other matters relating to its
regular business activities, could relate to compliance with various
governmental regulations and requirements, or could be based on other
transactions or circumstances. The Company does not believe there are any
such proceedings presently pending which, if ultimately resolved in a
manner adverse to the Company, could have a material adverse effect on
the Company's financial position except for the matters described in Note
___ to the accompanying Consolidated Financial Statements (which
description is incorporated herein by reference),and the matter discussed
below (as to which matter the Company considers the likelihood of a
material adverse outcome to be remote).
In October 1989, the Environmental Protection Agency (EPA) issued an
Order alleging that there has been a release of hazardous materials into
the environment at a site in Malta, New York (the "Site") at which the
Company leased a facility and directing the "potentially responsible
parties" ("PRPs"), including the Company, to undertake a remedial
investigation and feasibility study (RI/FS) of the Site. The Company,
however, believes that it is not responsible for any release of hazardous
substances that may have occurred at the Site, and has denied any
liability for the matter.
In August 1996, after the Site investigation was completed, EPA demanded
that a remedial plan be undertaken by the PRPs and that EPA be reimbursed
for cost it incurred with respect to the Site. Efforts have been underway
between the PRPs and EPA to negotiate a settlement of all claims; a
tentative settlement has been negotiated among the PRPs but has not yet
been approved by EPA. There is no assurance that the proposed settlement
will be completed, however the Company considers the likelihood of a
material adverse outcome to be remote and does not expect that any
expense or liability it may incur as a result of this matter in the
future will be material.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the registrant's security
holders during the fourth quarter of fiscal 1996.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Price Range of Common Stock
- ---------------------------
Since August 1994, the Company's Common Stock has been traded on the
over-the-counter market and is listed under the symbol MKTY on NASD's
electronic OTC Bulletin Board. Set forth below are the highest and lowest
prices at which shares of the Company's Common Stock have been traded
during each of the Company's last two fiscal years.
High Low
Fiscal Year 1996 ------ -----
First Quarter 1-1/8 3/8
Second Quarter 3-1/2 5/16
Third Quarter 3-1/4 1-1/2
Fourth Quarter 2-7/8 1-3/4
Fiscal Year 1995
First Quarter 3/8 1/16
Second Quarter 1-3/8 3/8
Third Quarter 2 1-1/4
Fourth Quarter 1-5/8 15/16
Number of Equity Security Holders
- ---------------------------------
Approximate Number of Record
Title of Class Holders* (as of December 13,1996)
------------------ ---------------------------------
Common Stock, $1.00 Par Value 535
- -----------------------------
*In addition, there are approximately 505 beneficial owners holding stock
in "street" name.
Dividends
- ---------
The Company has never paid cash dividends on its Common Stock. Subject to
the terms of the Company's loan agreements (described in Note ___ to the
accompanying Consolidated Financial Statements), under which the payment
of cash dividends is currently prohibited, the payment of dividends is
within the discretion of the Company's Board of Directors and will
depend, among other factors, on earnings, capital requirements, and the
operating and financial condition of the Company. The Company does not
anticipate paying dividends in the foreseeable future.
ITEM 6: SELECTED FINANCIAL DATA
The following table sets forth summary financial information regarding
Mechanical Technology Incorporated for the years ended September 30, as
indicated:
(In thousands, except per share amounts)
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Net Sales $31,901 $29,748 $40,234 $41,500 $42,462
Income (Loss) from
Continuing Operations 509(1) 2,922(2) 141 1,162 (335)
Net Income (Loss) 3,748 2,922 (24,378) 1,056 57
Earnings (Loss) Per
Share:
From Continuing
Operations .13 .82 .04 .33 (.09)
Net Income (Loss) .96 .82 (6.91) .30 .02
As of September 30:
Total Assets 14,452 14,483 25,317 42,428 38,890
Long-term Obligations * 6,222 2,144(3) 11,699 13,142
* omitted pursuant to Rule 12b-25.
- ---------
(1) Includes $750 thousand gain from the sale of ProQuip resulting from
the release of escrow funds. (See Note ___ to the accompanying
Consolidated Financial Statements).
(2) Includes ProQuip (sold in November 1994) results through the sale
date and the $6.8 million gain on its sale. All prior periods include the
results of ProQuip. (See Note ___ to the accompanying Consolidated
Financial Statements).
(3) Does not include approximately $8.0 million classified as a current
liability and paid in the first quarter of fiscal year 1995 from the net
proceeds received from the sale of ProQuip in November 1994.
Consistent with 1996 data, prior years have been restated to reflect the
Defense/Aerospace segment as a discontinued operation. (See Note ___ to
the accompanying Consolidated Financial Statements).
There were no cash dividends on common stock declared for any of the
periods presented.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
As described in Note ___ to the accompanying Consolidated Financial
Statements, the Company's United Telecontrol Electronics, Inc. ("UTE")
subsidiary filed for voluntary bankruptcy under Chapter 11 of the Federal
Bankruptcy Code in April 1994 and commenced an orderly liquidation in
October 1994. In June 1996 the Bankruptcy Court confirmed UTE's plan of
liquidation under which the Company was released from all remaining
liabilities related to UTE's bankruptcy. Accordingly, UTE's results and
the impact of the liquidation on the Company's results have been
classified as "discontinued operations" in the Consolidated Financial
Statements.
The Company recorded the effect of the final liquidation of UTE during
fiscal year 1996. Final adjustments to the Company's financial statements
as a result of the UTE bankruptcy are reflected in income from
discontinued operations. For 1996, income from discontinued operations of
$3.2 million was recorded as a result the Company's release from all
remaining liabilities . No income (loss) from discontinued operations was
recorded for fiscal year 1995, and a $24.5 million net loss was recorded
in 1994 for discontinued operations, including $15.4 million to write
down all assets to net realizable value and establish a reserve for
estimated future termination and liquidation cost.
In November 1994, the Company sold its ProQuip Inc. ("ProQuip")
subsidiary for approximately $13.3 million, of which $750 thousand was
placed in escrow for fifteen months to provide a fund for indemnity
payments. As of February 22, 1996 (the escrow expiration date), no claim
had been filed, nor was the company aware of any circumstances which
might give rise to future claims. Accordingly, the Company recognized the
remaining $750 thousand gain from the sale during the second quarter of
fiscal 1996. Prior year information contains ProQuip results through its
sale date (November 22, 1994) and the $6.8 million gain on its sale. (See
Note ___ to the accompanying Consolidated Financial Statements).
Results of Operations: 1996 in Comparison with 1995
- ---------------------------------------------------
[Omitted pursuant to Rule 12b-25.]
Results of Operations: 1995 in Comparison with 1994
- ---------------------------------------------------
The following discussion and analysis relates only to the Company's
continuing operations which included ProQuip prior to its sale in
November 1994:
Sales for 1995 of $29.7 million were $10.5 million or 26.1% lower than
1994. The decrease in sales was entirely attributable to the sale of
ProQuip. Excluding ProQuip, sales increased $2.2 million or 8.6% in 1995
as compared to 1994.
Selling, general and administrative expenses for 1995 were 27.2% of
sales, versus 24.7% in 1994. Product development and research costs for
1995 were 4.8% of sales versus 8.1% in 1994. The Company continued to
narrow the focus of its internal research and development activities. Due
to continuing operating and cash flow losses at Ling Electronics, Inc.
("Ling"), a $1.6 million impairment loss was recognized in 1995 to reduce
the carrying value of the Company's investment in that subsidiary.
As reported in Note ___ to the accompanying Consolidated Financial
Statements, the Company sold its ProQuip subsidiary for $13.3 million
which resulted in a gain of $6.8 million before income taxes.
1995 income from continuing operations of $2.9 million was $2.8 million
higher than 1994. The increase is attributed to the $6.8 million gain on
the sale of ProQuip reduced by the $1.6 million impairment loss on Ling;
in addition, 1994 included a $1.9 million gain on the sale of a building.
The Test and Measurement segment's financial results include ProQuip
until November 22, 1994, the date of its sale. The Test and Measurement
segment recorded sales of $18.1 million in 1995, $11.6 million lower than
the $29.7 million in 1994. The decrease in sales was entirely attribut-
able to the sale of ProQuip. Excluding ProQuip, the Test and Measurement
segment reported a sales increase of $1.1 million or 7.4%. LAB, Advanced
Products, and Ling divisions reported sales increases of 28%, 11%, and
3%, respectively. The Operating results of the Test and Measurement
segment for 1995 were a $2.0 million loss (including an impairment loss
of $1.6 million; see Note ___ to the accompanying Consolidated Financial
Statements) as compared to a $2.2 million profit in the prior year.
Excluding ProQuip and the impairment loss, the operating results were a
$1.1 million loss as compared to a $1.9 million loss or a $800 thousand
reduction in operating losses, 1995 compared to 1994. All divisions
reported improvements, however, Ling reported an operating loss of $2.0
million (excluding impairment loss) for 1995 compared to $2.6 million
loss for 1994. Ling's poor results reflect continued inadequate margins,
unfavorable adjustments to inventory, account receivable write-offs, and
severance cost associated with work force reductions. Export license
restrictions on certain of Ling's products, imposed in the first quarter
of the fiscal year 1995, caused numerous inefficiencies and delays in
shipments.
The Technology segment recorded sales of $11.6 million in 1995, $1.1
million or 10% higher than the $10.5 million recorded in 1994. The
operating loss for 1995 was $463 thousand or a $1.4 million improvement
from the $1.9 million loss recorded in 1994. The segment's performance
was favorably impacted by work completed on a major new order along with
lower product development and selling expenses, partially offset by a
contract cost overrun of $243 thousand, and inventory write-offs of $160
thousand on a contract with performance contingencies and $150 thousand
on the unsuccessful funding of an anticipated project.
Liquidity and Capital Resources
- -------------------------------
[Omitted pursuant to Rule 12b-25.]
ITEM 8: FINANCIAL STATEMENTS
[Omitted pursuant to Rule 12b-25.]
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Executive Officers" in Item
1 of this Form 10-K Report, and the information which will be set forth
in the section entitled "Election of Directors", and under the captions
"Security Ownership of Certain Beneficial Owners" and "Compliance with
Section 16(a) of the Securities Exchange Act of 1934" in the section
entitled "Additional Information", in the definitive Proxy Statement to
be filed by the registrant, pursuant to Regulation 14A, for its Annual
Meeting of Shareholders to be held on April 16, 1997 (the "1997 Proxy
Statement"), is incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
The information which will be set forth under the captions "Executive
Compensation", "Compensation Committee Report", "Compensation Committee
Interlocks and Insider Participation", "Employment Agreements", and
"Directors Compensation", in the section entitled "Additional Infor-
mation" in the registrant's 1997 Proxy Statement, is incorporated herein
by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information which will be set forth under the captions "Security
Ownership of Certain Beneficial Owners" and "Security Ownership of
Management" in the section entitled "Additional Information" in the
registrant's 1997 Proxy Statement is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information which will be set forth under the caption "Certain
Information Regarding Nominees" in the section entitled "Election of
Directors", and under the captions "Directors Compensation", "Security
Ownership of Certain Beneficial Owners", and "Certain Relationships and
Related Transactions", in the section entitled "Additional Information",
in the registrant's 1997 Proxy Statement is incorporated herein by refer-
ence.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The financial statements to be filed herewith are omitted pursuant
to Rule 12b-25.
The following exhibits are filed as part of this Report:
Exhibit
Number Description
--------- -------------
2.1 Purchase Agreement, dated as of November 23,
1994, among the Registrant, ProQuip Inc. and
Phase Metrics.(7)
3.1 Certificate of Incorporation of the registrant,
as amended.(1)
3.2 By-Laws of the registrant, as amended.
4.1 Certificate of Amendment of the Certificate
of Incorporation of the registrant, filed
on March 6, 1986 (setting forth the provisions
of the Certificate of Incorporation,as amended,
relating to the authorized shares of the
registrant's Common Stock) - included in the
copy of the registrant's Certificate of
Incorporation, as amended, filed as Exhibit 3.1
hereto.
4.20 Loan Agreement, dated as of June 1, 1987,
between the registrant and Chase Lincoln
First Bank, N.A. ("Chase Lincoln"), relating to
a $20,000,000 term loan to finance the
registrant's acquisition of United
Telecontrol Electronics, Inc. (the "UTE Loan
Agreement").(1)
4.21 First Amendment to Loan Agreement, dated as
of September 30, 1988, amending certain
provisions of the UTE Loan Agreement.(1)
4.22 Second Amendment to Loan Agreement, dated as of
February 21, 1990, amending certain provisions
of the UTE Loan Agreement.(1)
4.24 Third Amendment to Loan Agreement, dated as
of January 1, 1991, amending certain
provisions of the UTE Loan Agreement.(2)
4.25 Form of Note, in the amount of $9,181,700,
executed by the registrant on January 1,
1991 to evidence its indebtedness under the
UTE Loan Agreement.(2)
4.26 Form of Note, in the amount of $2,000,000,
executed by the registrant on January 1,
1991 to evidence its indebtedness under the
UTE Loan Agreement.(2)
4.27 Form of Note, in the amount of $1,000,000,
executed by the registrant on January 1,
1991 to evidence its indebtedness under the
UTE Loan Agreement.(2)
4.28 Mortgage, dated January 31, 1991, executed
by the registrant in favor of Chase Lincoln
and securing the registrant's obligation to
Chase Lincoln, including those under the
UTE and ProQuip Loan Agreements.(2)
4.30 Loan Agreement, dated as of September 30,
1988, between the registrant and Chase
Lincoln relating to an $8,000,000 term loan
to finance the registrant's acquisition of
ProQuip, Inc. (the "ProQuip Loan
Agreement").(1)
4.31 Negative Pledge Agreement, dated as of
September 30, 1988, executed by the
registrant in favor of Chase Lincoln in
connection with the ProQuip Loan
Agreement.(1)
4.32 Security Agreement, dated as of September
30, 1988, executed by the registrant in
favor of Chase Lincoln and securing the
registrant's obligations to Chase Lincoln,
including those under the UTE and ProQuip
Loan Agreements (the "Chase Lincoln
Security Agreement").(1)
4.33 First Amendment to Loan Agreement, dated as
of February 21, 1990, amending certain
provisions of the ProQuip Loan Agreement.(1)
4.34 Form of Note, in the amount of
$3,375,817.80, executed by the registrant
on February 21, 1990 to evidence its
indebtedness under the ProQuip Loan
Agreement.(1)
4.35 Amendment Number One to Security Agreement,
executed by the registrant on February 21,
1990, amending the Chase Lincoln Security
Agreement.(1)
4.36 Mortgage, dated February 21, 1990, executed
by the registrant in favor of Chase Lincoln
and securing the registrant's obligations
to Chase Lincoln, including those under the
UTE and ProQuip Loan Agreements.(1)
4.37 Second Amendment to Loan Agreement, dated
as of January 1, 1991, amending certain
provisions of the ProQuip Loan
Agreement.(2)
4.38 Mortgage Modification and Allocation
Agreement, dated January 1, 1991, executed
by the registrant and Chase Lincoln.(2)
4.40 Form of Payment Guaranty, dated as of
September 1, 1988 [as of September 30,
1988, in the case of ProQuip, Inc.],
executed by the subsidiaries of the
registrant in favor of Chase Lincoln and
guaranteeing payment of the registrant's
obligations to Chase Lincoln, including
those under the UTE and ProQuip Loan
Agreements.(1)
4.41 Form of Negative Pledge Agreement, dated as
of September 30, 1988, executed by the
subsidiaries of the registrant in favor of
Chase Lincoln in connection with the
ProQuip Loan Agreement.(1)
4.42 Form of Security Agreement, dated as of
September 30, 1988, executed by the
subsidiaries of the registrant in favor of
Chase Lincoln and securing the registrant's
obligations to Chase Lincoln, including
those under the UTE and ProQuip Loan
Agreements.(1)
4.43 Acknowledgment, Confirmation and Further
Agreement, made as of February 21, 1990,
executed by the subsidiaries of the
registrant in favor of Chase Lincoln with
respect to the registrant's obligations
under the UTE and ProQuip Loan
Agreements.(1)
4.50 Debt Restructure Agreement, made as of
February 21, 1990, between the registrant,
Chase Lincoln, and Manufacturers Hanover
Trust Company ("Manufacturers Hanover"),
providing for a restructuring of the
registrant's indebtedness to Chase Lincoln
under the UTE and ProQuip Loan Agreements
and of the registrant's outstanding
indebtedness to Manufacturers Hanover (the
"MHTCo. Existing Debt"), among other
things.(1)
4.55 Second Amendment to Debt Restructure
Agreement, made as of January 1, 1991,
between the registrant, Chase Lincoln, and
Manufacturers Hanover, amending certain
provisions of the Debt Restructure
Agreement.(2)
4.56 Second Debt Restructure Agreement, as of
July 22, 1992, between the registrant,
Chase Lincoln First Bank, N. A. ("CLFB"),
and Chemical Bank ("Chemical"), as
successor in interest to Manufacturers
Hanover Trust Company, providing for a
restructuring of the registrant's
indebtedness to CLFB under the UTE and
ProQuip Loan Agreements and of the
registrant's outstanding indebtedness to
Chemical, among other things.(3)
4.63 Promissory Note, in the amount of
$4,000,000 and dated July 22, 1992,
executed by the registrant to evidence its
indebtedness to Chemical from time to time
with respect to a line of credit in such
amount (The Chemical Line of Credit).(3)
4.64 Form of Payment Guaranty, dated as of July
24, 1992, executed by Masco Corporation in
favor of Chemical and guaranteeing payment
of the registrant's obligations to Chemical
under the Chemical Line of Credit.(3)
4.65 Promissory Note, in the amount of
$4,000,000 and dated October 31, 1994,
extending the maturity date of the
Promissory note dated July 22, 1992,
executed by the registrant to evidence its
indebtedness to Chemical under The Chemical
Line of Credit.(8)
4.66 Promissory Note, in the amount of $4,000,000
and dated October 31, 1995, extending the
maturity date of the Promissory note dated
October 31, 1994, executed by the registrant to
evidence its indebtedness to Chemical under The
Chemical Line of Credit.(9)
4.67 Form of Payment Guaranty, dated October 31,
1995 executed by Masco Corporation in favor of
Chemical and guaranteeing payment of the
registrant's obligations to Chemical under the
Chemical Line of Credit.(9)
4.80 Amended and Restated Loan Agreement, dated
as of July 22, 1992, between the registrant
and Chase Lincoln First Bank, N.A., which
amends, restates, combines, and supersedes
in full the UTE and the ProQuip loan
agreements.(3)
4.81 Form of Note, in the amount of $5,000,000,
executed by the registrant on July 24, 1992
to evidence its indebtedness to CLFB under
the July 22, 1992 Loan Agreement.(3)
4.82 Form of Note, in the amount of $7,984,770,
executed by the registrant on July 24, 1992
to evidence its indebtedness to CLFB under
the July 22, 1992 Loan Agreement.(3)
4.83 Additional Mortgage Note, dated July 24,
1992, executed by the registrant in favor
of CLFB and securing the registrant's
obligation to CLFB under the Loan Agreement.(3)
4.84 Additional Mortgage and Security Agreement,
dated as of July 22, 1992, executed by the
registrant in favor of CLFB and securing
the registrant's obligations to CLFB.(3)
4.85 Mortgage Consolidation, Spreader, Modification
Extension and Security Agreement, dated July
22, 1992, executed by the registrant and
CLFB.(3)
4.86 Confirmation of Guaranties and Security
Agreements, dated July 22, 1992, executed
by subsidiaries of the registrant in favor
of CLFB with respect to the registrant's
obligations to CLFB.(3)
4.87 Consent and waiver, dated December 21, 1993,
from CLFB to the registrant with respect to the
Amended and Restated Loan Agreement.(5)
4.88 Amendment One to Amended and Restated Loan
Agreement, dated as of August 1, 1994, between
the registrant and Chase Manhattan Bank, N. A.
which amends the Amended and Restated Loan
Agreement to defer the payment due on June 30,
1994.(6)
4.89 Amendment Two to Amended and Restated Loan
Agreement with waiver, dated as of November
22,1994, between the registrant and Chase
Manhattan Bank, N. A. which amends the Amended
and Restated Loan Agreement and waives any
existing defaults.(8)
4.90 Additional Mortgage and Security Consolidation
Agreement, dated as of October 6, 1995 executed
by the registrant in favor of Chase Manhattan
Bank, N.A. and securing the registrant's
obligations to Chase Manhattan Bank, N.A.(9)
4.91 Form of Note, in the amount of $340,000,
executed by the registrant on October 6, 1995
to evidence its indebtedness to Chase
Manhattan Bank, N.A. under the July 22, 1992
Loan Agreement.(9)
4.92 Amendment Three to Amended and Restated Loan
Agreement with waiver, dated as of November
30, 1995, between the registrant and Chase
Manhattan Bank, N. A. which amends the Amended
and Restated Loan Agreement and waives any
existing defaults.(9)
10.1 Mechanical Technology Incorporated Restricted
Stock Incentive Plan - filed as Exhibit 28.1 to
the registrant's Form S-8 Registration
Statement No. 33-26326 and incorporated herein
by reference.
10.3 MTI Employee 1982 Stock Option Plan.(1)
10.4 Agreement, dated December 21, 1993, between
UTE, First Commercial Credit Corporation
("FCCC") and the registrant, relating to an
advance against certain receivables.(5)
10.6 Agreement, dated June 2, 1993, between the
registrant and Mr. Harry Apkarian, Director,
regarding his employment.(5)
10.7 Agreement, dated February 22, 1994, between
the registrant and Mr. R. Wayne Diesel,
President and Chief Executive Officer,
regarding his employment.(8)
10.8 Agreement, dated December 14, 1994, between
FCCC and the registrant, modifying the
Agreement dated December 21, 1993 relating to
an advance against certain receivables.(8)
10.9 Agreement, dated May 30, 1995, between FCCC
and the registrant, extending the maturity of
the Agreement dated December 14, 1994 relating
to an advance against certain receivables.(9)
10.10 Agreement, dated June 28, 1995, between FCCC
and the registrant, extending the maturity of
the Agreement dated December 14, 1994 relating
to an advance against certain receivables.(9)
10.11 Agreement, dated September 21, 1995, between
FCCC and the registrant, extending the
maturity of the Agreement dated December 14,
1994 relating to an advance against certain
receivables.(9)
10.12 Agreement, dated October 25, 1995, between FCCC
and the registrant, extending the maturity of
the Agreement dated December 14, 1994 relating
to an advance against certain receivables.(9)
10.13 Agreement, dated December 27, 1995, between
FCCC and the registrant, extending the maturity
of the Agreement dated December 14, 1994
relating to an advance against certain
receivables.(9)
10.14 Mechanical Technology Incorporated Stock
Incentive Plan - included as Appendix A to the
registrant's Proxy Statement, filed pursuant to
Regulation 14A, for its December 20, 1996
Special Meeting of Shareholders and
incorporated herein by reference.
10.15 Agreement, dated December 6, 1996, between
the registrant and Mr. Martin J. Mastroianni,
President and Chief Operating Officer,
regarding his employment.
21 Subsidiaries of the registrant.
- --------------------------------------
Certain exhibits were previously filed (as indicated below) and are
incorporated herein by reference. All other exhibits for which no
other filing information is given are filed herewith:
(1) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report, as amended, for its fiscal year ended
September 30, 1989.
(2) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended December
29, 1990.
(3) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended June 27,
1992.
(4) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September
30, 1991.
(5) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September
30, 1993.
(6) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-Q Report for its fiscal quarter ended July 2,
1994.
(7) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 8-K Report dated November 23, 1994.
(8) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September
30, 1994.
(9) Filed as an Exhibit (bearing the same exhibit number) to the
registrant's Form 10-K Report for its fiscal year ended September
30, 1995.
(b) No reports on Form 8-K were filed by the registrant during the
last quarter of the period covered by this Form 10-K Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MECHANICAL TECHNOLOGY INCORPORATED
Date: December 30, 1996 By: /s/ R. Wayne Diesel
----------------- ---------------------
R. Wayne Diesel
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------- ----- ------
/s/ George C. McNamee Chairman of the Board of Directors 12/30/96
- ---------------------
George C. McNamee
/s/ R. Wayne Diesel Chief Executive Officer
- --------------------- (Principal Executive Officer)
R. Wayne Diesel and a Director "
/s/ Stephen T. Wilson Chief Financial Officer
- --------------------- (Principal Financial and Accounting
Stephen T. Wilson Officer) "
/s/ Harry Apkarian Director "
- ---------------------
Harry Apkarian
/s/ Alan P. Goldberg Director "
- ---------------------
Alan P. Goldberg
/s/ Stanley Landgraf Director "
- ---------------------
Stanley Landgraf
/s/ E. D. O'Connor Director "
- ---------------------
E. D. O'Connor
/s/ Dr. Beno Sternlicht Director "
- -----------------------
Dr. Beno Sternlicht